In short
The Commercial Rent Tax is a New York City tax paid by tenants, not landlords, on rent for commercial space in Manhattan south of the center line of 96th Street. It applies when annualized base rent is at least $250,000, and the effective rate is 3.9 percent after a 35 percent base rent reduction. A small business tax credit fully or partly eliminates it for tenants with total income up to $10 million and rent below $550,000.
Key points
Area: Manhattan south of the center line of 96th Street. Other boroughs and northern Manhattan are not covered.
Who pays: the tenant, including subtenants, licensees and concessionaires.
Threshold: annualized base rent of at least $250,000 before the 35 percent reduction, with a sliding-scale credit between $250,000 and $300,000.
Rate: 6 percent of base rent, reduced by 35 percent, for an effective rate of 3.9 percent.
Filing: a return is required if annual gross rent paid exceeds $200,000, even if no tax is due.
Who pays, and where
According to the NYC Department of Finance, the tax applies to tenants who occupy or use property for commercial activity in the covered area, where annual or annualized gross rent is at least $250,000 and no exemption applies. “Tenant” is defined broadly: lessees, sub-lessees, licensees, concessionaires and co-op tenant-shareholders. Certain related-party arrangements are also included.
For retailers and restaurants, this means a flagship on a major Manhattan corridor can easily fall within the tax, while a similar store in Brooklyn or above 96th Street does not. The tax was eliminated for properties north of 96th Street and in the other boroughs in 1995, according to the Department of Finance’s 2025 annual report.
How the tax is calculated
The statutory rate is 6 percent of base rent, which is gross rent less certain statutory deductions. All taxpayers receive a 35 percent base rent reduction, so only 65 percent of base rent is taxed. That produces the effective rate of 3.9 percent. A sliding-scale credit softens the step for rents between $250,000 and $300,000.
The small business tax credit
Since June 1, 2018, the Department of Finance has offered a small business credit:
Full credit: total income of $5 million or less and annual base rent before the reduction of less than $500,000.
Partial, sliding-scale credit: total income above $5 million but not more than $10 million, with base rent before the reduction between $500,000 and $550,000.
Not eligible: total income of $10 million or more, or base rent of $550,000 or more.
Confirm with a tax advisor how total income is determined for your structure before relying on the credit.
Filing dates
The tax year runs from June 1 to May 31. The annual return is due June 20. Quarterly returns are due September 20, December 20 and March 20. If a business ceases operations, the tax and the final return are due within 20 days.
Why it matters in a lease negotiation
The CRT is effectively an additional occupancy cost on top of rent. When comparing a Manhattan site below 96th Street with one outside the zone, include the tax in the occupancy cost model. Because the tax is computed on rent, items that change the rent figure, such as free rent periods and how certain landlord charges are classified, can affect it. Your tax advisor should review the lease structure before signing.
Steps for a new Manhattan tenant
Check whether the premises are south of the center line of 96th Street.
Calculate annualized base rent, including partial first-year periods.
Assess eligibility for the small business credit based on total income.
Register and calendar the quarterly and annual filing dates.
Include the CRT in your occupancy cost and break-even analysis.
How Devolus can help
Devolus builds occupancy cost models for brands comparing New York locations, including the CRT where it applies, and works with licensed brokers and tax advisors on the lease itself. You can start with the Readiness Check or write to us.
Frequently asked questions
Does the Commercial Rent Tax apply in Brooklyn or Queens?
No. It applies only in Manhattan south of the center line of 96th Street.
Does the landlord pay the Commercial Rent Tax?
No. It is imposed on the tenant, including subtenants, licensees and concessionaires.
What is the effective CRT rate?
3.9 percent. The statutory rate is 6 percent of base rent, but a 35 percent base rent reduction applies to all taxpayers.
Do I need to file if I owe no tax?
The Department of Finance requires a return if annual gross rent paid exceeds $200,000, even where the small business credit eliminates the tax.
Sources
Readiness Check
Bringing your business to the US? Test your plan in 3 minutes: setup cost, running costs and runway.
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General information, not legal, tax or investment advice. Rules and fees change: check the official sources before acting.